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Technology Stocks : Zitel-ZITL What's Happening -- Ignore unavailable to you. Want to Upgrade?

To: White Shoes who wrote (14807)	3/31/1998 2:36:00 PM
From: Pancho Villa	Read Replies (1) \| Respond to of 18263

WS: cool analysis! I should probably cover my AOL YHOO at a loss and just short more ZITL. Pancho

To: White Shoes who wrote (14807)	3/31/1998 5:09:00 PM
From: Greg M.	Respond to of 18263

Thanks, White Shoes, It was actually refreshing to go to the Yahoo board and see some numbers thrown around (instead of useless hype). Following is the response of Cautious Bull to Mr. Heartless, and GBritan's response to Cautious Bull. It seems the Bull (Bonnie'sGuy on good behavior?? JAS with numbers???) is arguing for a kind of "greater fool" theory. What do others make of these numbers? >>heartless, "no long ever discusses it." i suppose since i'm not as belligerent as most shorts, you don't remember me discussiing "it". ok, starting with your numbers, you say 120 $10M jobs/year. first off, no growing software company would trade at a p/e of 1. smartcapital was not unreasonable with suggesting 5. i would argue 10, but let's say the street discounts it to 5 because of the nature of the deadline. that brings us down to 24 jobs/year. second, i would double your net profit margin to 20% (yes, 20% after taxes). keane would earn the same if all it did was factory remediation. now we're back down to 12 jobs/year; 24 $10M contracts total. now you see why zitl soared over a year ago. all it needed was about 50, over 3 years, out of the 5000 or so $10M+ jobs out there (1%) to send this puppy to the stratosphere. well, for whatever reason, at this point in the game it looks like they won't be hitting the grand slam, but that's ok--all they need to do is land a few big contracts or perhaps several small ones with big-name clients. then they will have the appearance of hitting a grand slam, and the stock will rise based on that enthusiasm and appearance, even if actual fundamentally-"justified" valuation is never reached. further, md only has to get approximately 3x the revenue of zitl for the same valuation. combine the two revenue streams, whether in a merged company or not, and enough momentum can be generated to at least double the price from here. and while fundamental justification of the current price is becoming less likely, it is still a possiblity. md has a big-name client list, which could quickly expand. wait for zitl's conference call. that's enough for now, cb << GBritan's response: >>[Be consistant] If you are to put ZITEL contracts (really MD's as ZITL no longer claims to have a viable y2k division of its own) as "factory remediation" then you also have to limit the number of such contracts. No way is it $10M+ by 5000. What are the industry numbers for "factory remediation" (or some equivalent) for 1997 and for q1 1998? A small fraction of the numbers you gave. There are scores of very experienced y2k vendors who have learned a great deal about y2k fixes. Believe me if they could find significant business with 20% net margins they would drop the other jobs like a rock. Most (but not all) "easy" jobs are easily handled by in-house maintenance and were probably fixed years ago. <<